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Gold is the most well-known commodity, and it unfortunately hinges on the Federal Reserve's controversial quantitative-easing program, which could be tapered in the near future. In her confirmation before the Senate banking committee, Janet Yellen, nominee for the Federal Reserve chair, voiced strong support and defense for the continuation of massive bond-buying stimulus.

To date, the Fed's QE program has pumped more than $3.6 trillion into the financial market. Since the bank's QE kicked off in 2008, gold prices have benefited greatly, increasing more than 60% from the 2008 price point of $840 an ounce. QE1 and August 2010's second round of QE set off waves of buying that turned gold into a one-way for the next three years, culminating in September of 2011 with an all-time high of $1,921 per ounce. At the end of November 2011, the Fed once again stepped in with a bond buying program, driving the gold price back above $1,800 per ounce from $1,600 per ounce in September. In February 2012, gold plunged $75 per ounce within an hour following comments from the U.S. Federal Reserve indicating that a third round of QE3 was off the table. This was a prime example of the positive correlation between gold prices and the Fed's balance sheet.

This trend seemed to come to an abrupt halt in December of 2012, when a $45 billion increase in Fed bond buying to $85 billion per month could not move the gold market. Gold prices became more sensitive to the Fed's statements, rather than its actions. At the end of June 2013, gold hit a three-year low of $1,200 per ounce following statements and speculation that a tapering of asset purchases could come as early as September. Though the Fed's latest meeting did not support tapering the current stimulus program, gold prices are still plunging due to the optimistic view of the U.S. economy and the speculation that QE3 will be cut soon.

Although the Fed doubled its bond buying last September, the top gold exchange-traded funds, or ETFs, including , , and , have dropped around 25% each over the last 12 months, which speaks to gold's extreme vulnerability to QE tapering. Even the mere mention of tapering seems to send gold into a tailspin, as seen with SPDR Gold Shares, which has plunged 24% year to date and also suffered massive losses with its physical holdings. has suffered a massive drop of 48% so far in 2013, making it one of the worst-performing ETFs this year.

The Fed's upcoming decision on whether and when to taper its bond buying program is a highly concerning issue for investors. Even though there is speculation that the bond buying program may be abridged this year if the U.S. economy recovers sufficiently, I believe the Fed will not reduce its asset purchases until at least 2014 or may even inject more money into the market. The final meeting of 2013 is in December, and doubts are rising about whether the economy is doing well enough to persuade the Fed to pare back QE3.

Janet Yellen's recent comments show strong support for the program to be continued until we can confidently say that the economy has recovered enough to sustain job development. There is no guarantee that QE3 will continue into the new year, but if we look at the history of QE, it would stand to reason that QE3 still has a significant amount of time left.

This is the third round of money being injected into the financial marketplace. The Fed came back with QE2 after stopping QE1, and the same happened when QE3 was established to rescue another round of financial issues. Each time the Fed has attempted to cut the program, it has had to evaluate a new set of financial results. The most the Fed has ever said in regard to the proposed tapering plan is that it will reduce the asset purchases when the U.S. economy has a better outlook. Given the current state of the U.S. economy, the unemployment rate of 7.3%, and underwhelming GDP growth, it seems the outlook is still fairly grim at this point. It has been more than four years since QE1 started, and there is still not enough evidence to confirm a significant enough recovery in the economy.

Gold prices have fallen about 20% this year in expectation of QE tapering. Whether it is reaching the bottom is still in question. Gold prices and the U.S. dollar usually move in opposite directions, but if the Fed doesn't begin to draw down QE, a rise in inflation could drive gold prices up on a technical basis. In this case, you likely will not want to hold U.S. dollars when the U.S. central bank is on its way to money inflation to manage its substantial debt burden, making gold a viable investment to consider.

Whether the Federal Reserve is going to extend its quantitative-easing plan to resolve its debt crises or taper it in the near term, I am of the opinion that gold still has some major supporters, as there does not seem to be a strong enough commitment from the Fed to curb QE3 in the near future. If the Fed does not have the evidence that the economy is doing well enough to cut monetary-easing programs, then QE could continue indefinitely.

Although gold prices seem to rise and fall with the mere mention of tapering, I believe that gold can still be a solid investment during these uncertain times. Once the meeting in December determines the fate of QE3, and a tapering plan is either confirmed or put to bed, gold prices should stabilize and start to climb back to the previous figures seen in the beginning of the QE program.

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